ch. 12

• Marketing mix: It is a blend of product, price, place and promotion designed to attract customers.
• Four P's: The right product at the right price with the right promotion at the right place.
• All parts of marketing mix are important:

  • Product is what consumer buy so if the product isn’t what the consumer want they will not buy it.
  • Having the right pricing strategy is also important especially in a highly competitive market.
  • Promoting the products can attract customers which can help increase sales.
  • The product must also be sold in the right place.
• What makes a successful product?

  1. The good or service produced to satisfy a customer need or want.
  2. The product needs to be the right quality, so consumers are willing to pay the price of the product.
  3. The product shouldn’t be difficult to make that the cost of production is greater than the price paid for it.
  4. The product should be distinctive and have appropriate design that is consistent with its brand image.
• Types of products

  • Consumer goods: goods that are bought by the consumer for its own use.
  • Consumer services: services that are bought by consumers for its own use.
  • Producer good and services: goods and services that are bought by businesses to produce other goods and services.
• Product Development.

  • Most businesses are in a very competitive market and the survival and continuity of these businesses depends on developing new products to meet the changing needs and expectations of customers.
• Process of developing new product 

  1. Generate new ideas.
  2. Pick best idea for further research as some ideas are too expensive to manufacture.
  3. Decide if the company is able to sell enough for the product to be a success in terms of the size of market research, development cost and carrying out a break-even analysis to decide how many sales will be needed to cover the cost.
• Process of developing new product pt 2

  4. Develop a prototype, see how the product is manufacturing and the problems that will be faced while developing the product. Large businesses use computer simulation.

  5. Launch the product in one area to test the market.

  6. Go to a full launch of the product to the whole market.
• Advantages of Developing New Product.

  • Able to expand to new market so increasing sales & sales revenues which will increase market share.
  • It will provide a unique selling point if the business was able to develop the product before its competitors which will give a competitive advantage so business is able to charge higher price so increase profit margin.
  • Increase brand loyalty and keep it in a competitive market as the business was able to meet the changing needs and expectations of the customers so increasing the business reputation which will decrease the cost of advertising.
• Disadvantages of Developing a New product:

  • It will increase cost of marketing as it might increase the cost of market research to identify customers’ needs and the cost of advertising to raise customer’s awareness so increasing total cost.
  • No guarantee that the customer will like the new product so lack of sales and worsen the brand image as it fails to satisfy consumer’s needs.
  • Technical problems in the production could lead to delay the launch of the product so wasting time and resources.
• Costs paid by a business to launch a new product:

  • Promotion cost: so customers are aware of the new product.
  • Initial production cost: large capital expenditures required to purchase the machines needed to develop the new product.
  • Research and development: to research about new innovative products or new ideas to represent the product.
  • Marketing research: to identify the needs of the customers.
• Factors needed to be considered before deciding which new product to sell

  • Look for gaps in the market.
  • Listen to the requests of the customers.
  • Seek products that fit in with the image of his business.
  • Competitors.
  • Potential profit margins.
• Advantages of having a Wide Range of Products

  • Diversification which will spread the risk so if sales revenues of one product fell it will be covered by the sales revenues of another product so increasing total sales.
  • Access new market so increasing sales and sales revenues.
  • Widening the appeal of the business so increasing the brand awareness of the business as it is widely spread.
• Disadvantages of having a wide range of products

  • Lack of specialisation and expertise in one area as it is unable to focus on a single product and become its market leader so might affect the brand image of the business and its reputation if it isn’t able to maintain the quality of all of its products.
  • It is expensive as it will increase cost of marketing as it might increase the cost of marketing research and the cost of advertising to raise customer’s awareness so increasing total cost.
  • Added costs of storage as they will need extra space to keep its products so increasing the fixed cost.
• The Importance of Brand Image:

  Brand Image: It is an image or identity given to a product which gives it a personality of its own and distinguished it from others.

  Brand name: unique name of a product that distinguishes it from other brands.

  Branded products: They are usually sold for being higher quality products than unbranded products.
• Factors to consider when deciding a new name for a new brand:

  • Name must be easy to remember
  • Be appropriate for a product.
  • Reinforce the image created for the product.
  • Differentiate it as successful in minds of consumers.
• Ways of creating brand image and increase brand awareness:

  • Create a unique brand name for the business which is appropriate for the product its made for.
  • Creating an easy recognisable logo which is easily recognised by customers as they will know the product is made by the company so attracting customers and increasing sales revenues.
  • Effective Advertising using a jingle that makes it easily recognisable so customers will know about the product and once customers hear it, it will remind them of the product.
• Advantages of Branding:

  • Able to differentiate the product from its rivals as it give the product a unique selling point so customers want to buy more from the company’s products so achieving a competitive advantage.
  • It is a way to encourage brand loyalty so maintain level of sales.
  • It is a mean to attract potential customers as people might feel it will give them a higher status.
• Advantages to the business of changing brand image:

  • Reflect new product range, so able to attract a wider market target.
  • The image might be out-of-date, so need to change it to remain competitive.
  • Customers like something new, as they want to try it.
  • Attract new customers, so able to increase sales and sales revenues.
• Disadvantages to the business of changing brand image

  • Damage customer loyalty, as existing customers don’t like it.
  • Customers might not recognize the new brand image and confused, so might reduce sales.
  • It increases expenses, as it takes time and cost to change the logo and brand image.
• The Role of Packaging

  • Packaging: it is the physical container or wrapping for a product. It is also used for promotion and selling appeal.
  • Packaging is an additional cost which increases the final price of the product.
  • Also businesses shouldn’t spend too much on packaging as it will increase the price above the level consumers are willing to pay.
• Importance and Role of Packaging: 

  • Packaging gives protection to the product and not allow it to spoil or be damaged and allowing the product to be used more easily or the product will be wasted but it will increase the packaging cost also it will be easier to store the product but it will increase the storage cost.
  • Packaging provide a brand image so able to differentiate the products from rivals so consumers recognizing the product and promoting the product as it has to appeal the product and catch the customer’s eye.
  • It gives an impression of high quality which can increase sales.
• The Product Life Cycle

  Changes in the level or pattern of sales of a product over time.
• • Product Development:
  • A prototype of the product is tested.
  • Marketing research is carried out before the product is launched.
  • There are no sales.
• Introduction to product life cycle:

  • The product is introduced to the market.
  • Price is low for the product than competitor’s price, and it might be high price skimming if there is no competition.
  • Sales are low.
  • Business use informative advertising.
  • The product might be making a loss because of the cost of heavy advertising to gain product recognition and create product awareness.
  • No profit is made as the cost of development the product isn’t covered.
• Growth:

  • The product is becoming better known to consumers.
  • Sales are increasing.
  • The product usually starts to make profit at this stage as the development cost is covered.
  • The business might make some changes to the product as a result of customers’ feedback.
  • The price can be increased or reduced to the same as competitors’ products as they try to take the customers.
  • The business used persuasive advertising to encourage brand loyalty.
  • Promotional activities to convince customers to buy the product again and attract new customers.
• Maturity:

  • Sales increase slowly.
  • The most profitable stage in product life.
  • They either use competitive pricing or promotional pricing.
  • Promotional activities to remind consumers that the product is still available and how it differs from competitors.
• Saturation:

  • Sales are saturated and profit starts to fall.
  • Competition is high but there are no new competitors.
  • Competitive pricing is used but the price should be reduced to remain competitive.
  • High and stable level of advertising is used.
• Decline

  • Sales are falling because the product lost its appeal.
  • The price might be reduced to maintain sales or sell off the remaining inventory before withdrawing from the market.
  • The product becomes eventually unprofitable.
  • Advertising is reduced then stopped.
  • The product is withdrawn from the market.
• Short Product Life Cycle

  • Actions of competitors.
  • Fashion and changing taste.
  • Availability of new technology.
  • Availability of substitute.
• Extension Strategies

  Marketing activities to extend the maturity stage of a product.
• Extension strategies include:

  • Introducing new features and variation so more attractive to new or existing consumers.
  • Use new advertising and promotional activities through looking for other ways for promoting the product to appeal to a new market or remind the existing market that the product is still available.
  • Seeking new target markets to widen customer base managers will look to see if there are other markets for their products perhaps foreign markets.
• Price:

  • It is the amount paid by the customer to the supplier when buying goods and services.
  • The producer must choose a price that fits that the rest of the marketing mix.
  • Product Quality: the product meets the needs and expectations of customers.
  • Consumers prefer to buy lower priced products even if consumers think that a product is better than a similar product as they may not be able to afford the higher priced product.
  • Other consumers will only buy a product if the price charged is high, as this will give the consumers a certain status.
• Pricing Strategies

  • If the product is branded, it will have a distinctive name and packaging and aimed for a particular segment, therefore producers might charge higher price.
  • If a product has many competitors in the market, the business will have to monitor the prices charged by the competitors to make sure its own products remain competitive.
• Cost-plus Pricing: The price is based on the cost of making a product and the addition of a fixed percentage for a profit “markup”.

  Advantages:

  • They know that the cost will be covered so they are able to make a profit per item so knowing the profit margin will help the business be able to convert sales revenues into profit.
  • It is a simple and easy way to calculate the price so saves time for the business when setting the price of the product.
• Disadvantages of cost-plus pricing:

  • Doesn’t consider what competitors do so price set could be higher than competitors so might lose its competitive advantage so reducing the market share.
  • Little incentive to control cost as they know they can cover the cost which might lead to inefficiency and increase waste.
• Competitive Pricing:

  • Setting a price similar to that of competitor’s products which are already established in the market or just below their price.

  Advantages:

  • It is possible to increase sales if the price is realistic and isn’t under or over priced so business doesn’t lose market share.
  • Avoid price competition so avoiding any reduction in profit for all businesses in the industry caused by price war.
• Disadvantages of competitive pricing:

  • The business will need to do a research to find competitors’ prices so wasting time and increasing the total cost of the business.
  • The business may not be able to cover the cost of production as they might not be able to reach break-even point so losses being made.
• Penetration Pricing: price is set lower than competitor’s prices in order to be able to enter new market or launch a new product.

  Advantages:

  • Customers will be attracted to lower prices so increasing sales in a competitive market and market share.
  • Revenue will increase if the product entered the market successfully which might increase the total profit of the business.
• Disadvantages of penetration pricing:

  • Competitors may lower the prices so losing its competitive advantage, won’t be able to make additional sales.
  • Customers may think that the product is for lower quality so harming the reputation and brand image of the business and reduce sales revenues.